Credible enough? Forward guidance and perceived National Bank of Poland’s policy rule

Abstract

Forward guidance effectiveness is conditional upon its credibility. This policy, when taken as credible, should reduce the perceived impact of macroeconomic variables on the interest rate. Using the Taylor rule framework and employing micro-level data set, we test the perception of monetary policy in Poland among professional forecasters. Our results show that the Taylor principle is violated in the forward guidance period, which provides evidence for forward guidance credibility.

Keywords:

• Survey data
• forward guidance
• Taylor rule
• expectations

JEL Classification:

• E44
• E52
• E58

Notes

¹ Other studies have confirmed that professional forecasters followed the Phillips curve or Okun law (Pierdzioch, Rülke, and Stadtmann 2011; Rülke 2012).

² As a robustness check, we performed 2SLS estimation, where we obtained similar results. Point estimates were also robust to different instrumental variable sets.